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Closing

Plan ahead for the cash and documentation requirements. While straightforward requirements are laid out in the lease, closings are frequently delayed due to poor planning. In a tight market, tenants should avoid unnecessary delays in executing leases.

At the closing of the lease, the three major cash and documentation requirements are:

  • pre-payment of at least one month's rent, which will include base rent plus electricity (if electricity is charged on a rent inclusion basis);
  • the security deposit, unless you negotiated a letter of credit; and
  • the insurance certificate naming the landlord as insured party.

When reviewing your lease document, be sure that you are aware of any other special documentation requirements. To name a few, typical problems that occur around closing time are:

  • a tenant did not send the insurance clause to its insurance agent until the day before closing and the insurance certificate cannot be obtained in a day;
  • the legal or other appropriate name of the landlord does not appear on the insurance certificate and the landlord will not execute the lease until the certificate is corrected (make sure that you get the landlord's legal name in writing from the landlord's representative);
  • the letter of credit is delayed by the bank or the bank was not given adequate notice of the due date and the closing is delayed;
  • the tenant was expecting a cash infusion which is late or not forthcoming and other arrangements have to be made to meet the initial cash requirements;
  • on the day of the closing, the CEO or other decision maker who will sign the lease has not read it (wants a few changes) and wants a meeting with the attorney to understand the implications before signing. Please be aware that in this market delays on the part of the tenant may give the landlord the idea that the tenant is not going to close and the deal may likely be pulled.

 

 

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